Microsoft settled a suit it filed against a small Internet company, acknowledging that its actions to take down a cybercrime ring last month wound up knocking regular Internet users offline.

The case, which remains sealed, illustrates the risks law enforcement and tech companies face as they seek to block bad actors from the Internet. Namely, there can be a lot of collateral damage.

Microsoft on June 30 filed a civil suit in federal court in Nevada to block a particular computer virus that cybercriminals use against its customers. The bad guys, in this case, appeared to be using a Web service run by Vitalwerks Internet Solutions, a company based in Reno, Nev.

So Microsoft persuaded a court to let it reroute Vitalwerks traffic to its own servers so it could strip out malicious code. In the suit, it accused Vitalwerks of assisting the infection of “millions” of computers with malware.

In the meantime, it also knocked 1.8 million Vitalwerks users offline, many of whom had nothing to do with the case.

On Wednesday, Microsoft acknowledged it now believes Vitalwerks wasn’t “knowingly involved” in the cybercrime plot. In a joint statement, Microsoft also said “a number of Vitalwerks customers were impacted by service outages as a result of a technical error.”

When asked if Microsoft agreed to pay Vitalwerks as part of a settlement, a company spokeswoman said she couldn’t discuss the agreement other than to say the smaller company is “very pleased with the terms.”